BOSTON (S&P Global Ratings) Dec. 23, 2024–S&P Global Ratings lowered its long-term rating two notches to ‘A+’ from ‘AA’ on the Cleveland-Cuyahoga Port Authority, Ohio’s series 2009A taxable lease revenue bonds issued for the Wade Park Office Building project in the Louis Stokes Cleveland Veterans Affairs Medical Center. The outlook is stable.
“The lower rating reflects our view of the weakened essentiality of the project, amid an evolving post-pandemic return to office landscape coupled with the project’s narrow revenue stream and scope as it serves veterans–who make up an overall small percentage of the nation’s population–within a confined region,” said S&P Global Ratings credit analyst Victor Medeiros, “and we consider the potential for non-appropriation of funds and the fact that the facility’s lease agreements require lease renewals every 10 years the rating’s chief credit risk.”
Securing the bonds are payments from the U.S. Department of Veterans Affairs (VA) to the owner under services agreements. To build the project, the VA agreed to an enhanced-use lease with the developer. The lease between the authority and lessee (Veterans Development Office/Parking LLC) runs through the life of the bonds. However, the two service agreements between the VA and Veterans Development LLC, an Ohio limited liability company set up by the developer, have renewal risk due to their 10-year terms.
The rating on this obligation is based on the application of our criteria, titled “U.S. Federal Future Flow Securitization Methodology” (published March 12, 2012, on RatingsDirect) and “Federal Leases” (published June 18, 2007).
The project involves a medical office building and parking garage next to the VA Luis Stokes Medical Center in Cleveland. It was completed in 2011.
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